Airlines Go Large With Electric Aircraft Investment

American Airlines, Virgin Atlantic, and leasing group Avolon have committed to buying up to 1,000 of Vertical Aerospace’s VA-X4 eVTOL aircraft. The deals announced late on June 10 are potentially worth up to $4 billion for the U.K.-based manufacturer and represent the largest sales agreements placed so far in the emerging advanced air mobility sector.

At the same time, Vertical announced plans for an initial public offering on the New York Stock Exchange through a merger with special purpose acquisition company Broadstone Acquisition Corp. The transaction, which the parties expect to close in the second half of 2021, could value the company at between $1.8 billion and $2.2 billion based on a $10 share price for the public investment in private equity (PIPE), generating gross proceeds of $394 million.

American and Avolon, along with Honeywell and Rolls-Royce, also participate in the PIPE. They will join existing strategic backers in Vertical, including Microsoft’s M12 investment arm, 40 North, and Rocket Internet SE.

American said it will invest $25 million, but the other new backers have not disclosed how much capital they will provide. Honeywell and Rolls-Royce already serve as partners in the program, supporting plans to complete EASA type certification of the four-passenger, all-electric VA-X4 aircraft in 2024. Other partners include GKN Aerospace and Solvay.

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Under the terms of the pre-orders placed on June 10, American has provisionally agreed to take 250 aircraft, with options for 100 more. Avolon has committed to 310 aircraft, plus options for a further 190. American intends to work with Vertical to develop passenger operations and infrastructure in the U.S. market.

“Emerging technologies are critical in the race to reduce carbon emissions, and we are excited to partner with Vertical to develop the next generation of electric aircraft,” said American Airlines CFO Derek Kerr. “For years, American has led the industry in investing in newer, more fuel-efficient aircraft. Today’s partnership is another example of that commitment and an investment in the future of air mobility.”

Virgin Atlantic, which said it would buy between 50 and 150 aircraft, envisions a network of short-haul scheduled services in the U.K. with the aircraft on routes of up to around 120 miles. The services will operate from hubs at London’s Heathrow and Gatwick airports, as well as Manchester. 

Vertical claims its business will achieve profitability and cash-flow breakeven on annual sales of fewer than 100 aircraft by 2024. Based on the announced agreements, the list price for the VA-X4 would appear to be $4 million.

Bristol-based Vertical was founded in 2016 by Stephen Fitzpatrick, who is the founder of energy retailer Ovo. He remains the majority shareholder following the merger with Broadstone.

“This is the most exciting time in aviation for almost a century,” Fitzpatrick commented. “Electrification will transform flying in the 21^st century in the same way the jet engine did 70 years ago.”

Broadstone was founded by U.K. entrepreneurs Hugh Osmond, Marc Jonas, and Edward Hawkes, who have managed investments worth more than £10 billion ($14 billion) over the past 20 years. They claim to have delivered an internal rate of return of 48 percent and an equity multiple of 3.5 over the past 20 years.

“Transportation is one of the next big sectors of the global economy to be disrupted at scale,” said Osmond. “Vertical has a clear commercial plan to challenge short-haul air travel and to create new markets where neither cars nor public transport can cope with demand.”

Though the COVID pandemic complicated development work, Vertical Aerospace managed to complete the detailed design of what it then called the VA-1X last year and has begun building the prototype. Since then the company changed the name to VA-X4 to reflect its four-passenger capacity.

Vertical chief engineer Tim Williams said in January that the company planned to roll out a full-scale aircraft in late July, followed by ground tests in late August, and a tethered first flight in late September. Vertical planned to start untethered flights next year, first in vertical mode, then in forward flight only, and, finally, in transition between the two modes.

Vertical Aerospace has tapped Honeywell for avionics and control systems. The companies are using virtual-reality simulation to develop the flight deck.

In February, Vertical chose Solvay to provide composite aerostructures for the aircraft. The following month the company said that Rolls-Royce would develop an electric propulsion system for the aircraft. Vertical also announced increases in its projected range from 100 to 120 miles and in its speed from 150 to more than 200 mph.

This story is from FutureFlight.aero, a news and information resource developed by BJT parent company  AIN to provide objective, independent coverage and analysis of cutting-edge aviation technology, including electric aircraft developments and advanced air mobility.